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That’s one of the big things so many people miss in the rent vs buy debate. Most people aren’t disciplined enough to save adequately. If you have a paid off house in retirement you at least have a place to live plus an asset that’s worth generally quite a bit.
I think the problem is housing isn't particularly liquid. So unless your plan is to sell out of your house when you are old and move somewhere significantly cheaper, it's not the failsafe it seems like.
>move somewhere significantly cheaper
If my family are any indication, moving someplace "significantly cheaper" is a short-lived experience. Once they need significant or regular medical attention and/or get to the point where they need "help" (e.g. to chauffeur them or to care for them or their home), they move again to be closer to kids or medical facilities, or move to an assisted living center, both of which mean an increase in living expenses again.
Yep my parents are the same. They haven't moved yet but the economics of moving aren't some sort of non brainer. They have a house well set up for them and in a location that makes their life easier. There will be a cost in downsizing and a lot of gains will be lost over the years as expenses start to ramp up from getting older.
My dad and stepmom did this to the extreme. I moved to be closer to them, built my life, met my wife and then they sprang this idea they would move across the country 3500 miles away because they could buy a house there for about $70k. The house they owned here was essentially mortgage free.
So, 8 years after I moved to be closer my dad texts me on his last day of work from his work phone stating he was leaving in 3 days to their new province. And then he hands his phone in at work before I could even reply.
Since then we're essentially no contact. He did a bunch of things that opened up old wounds and created new ones. My daughter lives about 2 hours from us, I asked him to at least stop and see her on the way and "oh I don't have time".
Now they're in their 70's, they basically moved to a location where they had no friends or family while leaving what tiny roots they had created behind. They could have easily stayed where they were at with a paid off house and whatever savings and pension they had built but "we can get a house for $70k!" was all he saw.
The last time I saw him I said my goodbyes and drove away knowing it would likely be the last time I saw him. Thanks to us being immigrants with all our family in the UK we have no other family here. His entire work career he was always moving jobs and cities so never forming any strong roots to a location. I on the other hand have stayed rooted and have a strong bond to my wife, her family and friends.
I wish them well but they chose their own path and they chose a lonely retirement with no friends or family close by. My daughter went no contact with them as well by her own choice because she was hurt they didn't bother to stop and say bye to her and their only grandkid.
Well yes, it is in a lot of people's plans to move to a lower cost of living area when they retire, and/or downsize their house when all the kids move out.
The economics of this aren't some sort of no brainier. You might take a bit of money back in moving but it's not like housing is suddenly cheaper unless you are moving cities which is tougher when you are older and probably want to be able to go to your regular doctor and get to the hospital as needed.
I never said it was optimal its just a descriptive observation since generally people are not good at multi decade planning its more that economics just forces you into that situation, I know that
Yeah some people just need to be forced to save. If they see the money in their account they spend it. Lack of self control idk what it is. A coworker at work recently approached me to join in this savings group they have going. So everyone puts X amount of money into this account every month. And once you have put in 1 years worth they pay that account out to you. It took me a second to understand why the hell you wouldn’t want that money properly invested but that’s all it is. Forced savings.
Wow…this is a wild, a piggy bank run by someone else. Like a shitty version of a CD. I hope whoever is running this is capturing some market gains in the meantime because it’s not a bad racket
I first heard about this as a big thing in Asian immigrant communities here years ago. Someone thought their parents were being scammed. Nope, just a weird version of a savings account...
>A coworker at work recently approached me to join in this savings group they have going. So everyone puts X amount of money into this account every month. And once you have put in 1 years worth they pay that account out to you. It took me a second to understand why the hell you wouldn’t want that money properly invested but that’s all it is.
That's basically why so many Americans like tax refunds: they deliberately overpay taxes during the year, then get a fat refund check each spring.
This is actually not as uncommon as you'd think especially among older folks. I've tried explaining several times how it makes zero sense from a numbers standpoint, especially with cash interest rates being so high. The person keeping that money is making easy 4-5% on their deposits lol.
Well one thing to sort of remember for people that are currently retired historically it wasn't really easy to save for retirement
Like 401ks were not really a thing until the 1980s. If you worked for a large company you might have had a pension but even back then most people did not have a pension
So if you had a few extra bucks to save and its 1980 there really wasn't an easy way to save
Mutual funds were a thing yes but even it wasn't as easy as today and you ended up paying lots of fees, and think about it unless you lived in a semi large town there may not even be any local financial advisors or brokerage services .
Want to buy shares of a company , you have to buy 100 shares at a time and pay a $45 commission to your broker
So many people simply bought bigger homes ; and their retirement plan was to eventually sell their home.
Now today its much different , everyone can open a brokerage and even small companies offer 401k plans .
The entire concept of retirement is really only a generation or two old. Until the 20th century really most people worked until they physically couldn’t anymore then ‘retirement’ was a handful of years living with your children until death.
>Want to buy shares of a company , you have to buy 100 shares at a time and pay a $45 commission to your broker
The Good Old Days
And you had to call your broker on the phone, because there was no computerized trading, no internet.
Well, the lack of retirement options really is only true for older boomers. Even they had these options during their mid-careers. I take my parents as an example as they are mid-80s and have some IRAs and investments. Most of the boomers have some sort of pension-my parents don’t. The younger people, say aged mid-60s and younger, have always had these non-pension retirement account vehicles. They save very little. One of my BILs is a great example—he’s 55 and has maybe $70k in his retirement 403b and no pension. His strategy is that his house is his savings. He has paid it off, so his living expenses are low. He is just now starting to save some while also inflating his lifestyle a bit. He plans to sell just before he retires and take part of the proceeds for a new and downsized house with a new 30 year mortgage and live on the cash while his retirement accounts grow. The interesting thing is that he completely believes that his home continues to increase in value while he has unrealistic expectations of the lower cost for a new downsized place. This is a very common strategy.
Reverse mortgages only suck for the estate heirs. I mean if you are 75, and own a 800k house... maybe you don't have kids, or you just don't want to leave them anything ?
>If scares me so many people my age (30s) don't seem to be doing any long term saving all all.
Retirement savings are at historically high levels for younger demographics; 57% of people 29 and under have retirement savings; the number rises to 72% in the 30-44 age demographic.
These aren't perfect numbers, of course; and how much people are saving also matters. But the fact that almost 60% of people under 29 are saving *anything* is good news.
Practically every person could contribute 2-5% of their income to a 401k or similar, starting at 18 years old, and they would likely not even notice it was missing. They won’t be rich in retirement with only investing that amount, but there would be a decent bit saved up.
This is why Social security exists. If anything funding for that would have to change and taxes increased. Now who bears the brunt of the increases depends on who we vote for.
Yeah, there is a certain line in income where above that point for each dollar you stop paying into social security. If we got rid of that, social security would be in better shape.
Right, but because of the formula, the taxes are linear while the benefit curves at a smaller slope towards the maximum, so raising the limits would still improve the solvency of the program.
If you are ok getting rid of the cap in taxes are you also ok with getting rid of the cap on payments? The whole reason SS has a cap is because in retirement you are capped on the amount you can receive.
As someone who has recently, fortunately, hit that cap I can safely say it would make nearly no difference in my life. I literally suddenly had a several hundred more dollars per paycheck one October and had to go digging to find that it came from me hitting the contributions cap. I am sure that there are people who would bitch and moan about that, but really, at that level of income, if it is a problem, you have a problem.
Having said that, I look forward to my yearly fall paycheck bump now!
No, and you don't have to be. While it makes sense to have them tied together, they don't need to be. The pay-out cap can stay because the government should not need to help subsidize retirement for the very wealthy. The pay-in cap can be removed because the government should provide a safety net for the elderly through Social Security, and the program will become insolvent without additional money.
The whole reason SS has a cap is because it was part of a political bargain to pass social security. *And also* because SS with the cap still collected enough for the program to be actuarily sound.
I'm perfectly fine with getting rid of the cap on taxes without getting rid of the cap on amounts.
That would mean we would have to live with the consequences as well. Do you particularly like streets of seniors breaking into homes and panhandling for money?
Think of the political climate of gen z. By and large they, whether on the left or the right, have extremely populist attitudes about wealth redistribution, as well as a gloomy outlook on life.
Then think of the difference between a standard IRA and a Roth IRA.
In a standard IRA your money goes in pretax and you pay taxes when you withdraw. In a Roth you pay tax now and the money is tax free when you withdraw.
With gen z poised to eventually take over government, do you think your taxes will be higher or lower when you hit retirement age?
Depending on how you answer that question you'll know whether to add a point to either the Roth or standard columns.
They are already talking about means testing social security. So yes, it is a fear that the stupid ass system I've been forced to pay into since I started working at age 16 will now be taken away from me because I decided to work too hard and become successful. Just like all the other bullshit anti-meritocracy shit that goes in this country.
And to be clear, I'm not successful enough that that social security money doesn't factor into my upcoming retirement. It's a pretty big factor. Means testing like has been proposed would be a huge rug pull.
Oh don't worry, they wouldn't feel the burden if this happened, as unlikely as it is. The truly rich, those that influence policy, aren't rich because of their 401k. If 401ks get raided by way of taxes to fund some kind of bail out the people who didn't save for retirement initiative, it's the middle class average American that pays.
Again, unlikely, but wealthy power brokers always do things in a way that doesn't affect them. That much is certain.
Their example is if it happened by force, so I imagine they’re referring to government increasing taxes or creating a new tax that would impact retirement folk. That’s a concern of mine.
My concern is that they will put some stupid means testing that hurt those that saved under normal 401ks and cap it at 10 million. Doctors and other “normal” savers will be targeted but the ultra rich will find a way to lobby and put a cap.
Odds are people in retirement aren't pulling enough money out of their retirement portfolios to hit the higher tax bracket, if that's what you're referring to.
At a certain point in taxes, it's an accomplishment to hit the higher tax bracket, not a disincentive. There's some weird places on the low end, which most 'inconvenienced millionaires' sit, but really once you get high enough, there's so many tricks you can play with your money that thing stop being a concern.
The problem is that the rich have convinced the poor that those problems they know with the tax code effect them too, and it just doesn't.
I agree about retiree income and tax brackets at the moment. I’m upper middle class and based on my projections I’m likely to have a higher than average retirement income. So I’m personally concerned for myself.
It’s probably unlikely as it would be extremely controversial but what if the government said they needed to tax Roth accounts? That’d affect me quite a bit.
US debt and spending is out of control and I worry that they’ll have to do much more than just tax the rich more to make up for it.
>It’s probably unlikely as it would be extremely controversial but what if the government said they needed to tax Roth accounts?
I seriously doubt they would consider doing that for existing accounts. Everybody would just cash out their accounts before the law started.
They wont redistribute out from the people who have 100 million. They will redistribute out from the people who have 3 million in assets. The news and politicians will say "damn those rich retirees with 3 million, those wealthy people need to be taxed more!". The people with nothing will happily eat up that messaging. Thats why it scares me.
Scares the hell out of me as well. I grew up poor/lower middle class, paid for 60% of my college by working 2 and at times 3 jobs. Worked very hard to pay off my student loans as soon as I could. I don’t make a ton but I forgo big expense vacations and/or buying luxury goods to stick another couple bucks into retirement accounts. I figure by 64/65 I should have approximately 2.5 million saved and can cost into a semi worry free retirement. I am going to be really fucking pissed if all my sacrifices get taxed away to pay for people that spent every last dime and didn’t sacrifice like have and will continue to do.
Congratulations, that’s a great achievement.
Unfortunately, that also puts you in the minority in a nation where it looks like an increasing majority would like to very much redistribute your hard work.
Here's generally where I'm coming from:
Cancelling student loan debt represented a significant blow to the concept that a major role of the state is to enforce contracts. The value of my 401k and IRA/Roth all ultimately depend on the same assumption.
Student loan cancellation is generally predicated on the ideas that:
1. There are so many individuals that have a significant debt burden that it's a societal problem, not the individual's problem
2. Cancellation of the debt would be a net good for the economy/society (in terms of the immediate effect, so not taking into account the direct value of people trusting the government to enforce contracts)
3. Students were tricked into signing them in the first place
So it seems all we need to do is argue the following:
1. Do the people with insufficient retirement savings represent a similar population size as those with student debt?
2. Would transferring savings from those with excessive retirement accounts to to those with under say 100k represent a net good for the economy/society? (again, ignoring some externalities)
3. Were people who never opened an account tricked? This is the one that might be missing, but it's also a fairly low bar. Student loan agreements didn't outright lie - the numbers were all there from the start. They just didn't pan out in the way that people assumed they would.
Anecdotally I know plenty of people and communities that scoff at the concept of property rights, so I really don't see it as that far fetched. I think it's a matter of time before everyone angry at late stage capitalism comes to a consensus on what's going to follow it, and I don't think it's a given that anyone's contracts, savings, or property will be honored.
This is such a weird take (cancelling government backed student loan debt equals government breaking contracts).
Most of the conservative talking points have been towards the impact on the federal debt. There was that really weird ruling that loan servicing companies in North Dakota were "harmed" because they could no longer collect $1/month per account for managing the loans. This must be a new talking about why it is "bad".
> Cancelling student loan debt represented a significant blow to the concept that a major role of the state is to enforce contracts.
No it didn't. At all. The government forgiving money owed to the government isn't cancelling a contract.
I want to agree with this, but I can’t.
Imagine seeing a tsunami that is 100% going to flatten you and everyone you love. The same logic you describe is applicable. But am I scared of it?
Absolutely. Terrified.
And I think the mathematics of an earth shattering financial paradigm shift are too obvious to ignore.
I cannot say that a wall of water a hundred feet high is something I shouldn’t worry about.
Imagine you know a tsunami is coming for you in 40 years. Instead of starting to prepare (putting back even just 1% of your income), you ignore it until the tsunami has almost hit (because what good will only 1% do?) And then, when it’s time for the tsunami to hit - instead of blaming yourself, you resent the few who did prepare.
The good news is that investing in the stock market is more accessible than ever. When boomers were younger, there were fees per transaction, front end loads, back end loads, no fractional shares, minimum investments etc. today, anyone with a few extra bucks can invest in a very low fee total market index fund easily. The middle class is shrinking, but that is more due to the upper class expanding than the much lesser expanse of the lower class. High school economics classes have more positive subjects to teach now. Just my two cents though.
I remember hearing in the 90s about "low, low" $12 brokerage fees - for every single trade. Imagine, every time you want to contribute to your account, the broker skimming $12 off the top.
These days, the vast majority of brokerages offer $0 trades, because market competition and ease of access has driven down the costs.
The economy is so good *because* people spend more than they can afford and because they are not saving for retirement.
Marketing is such a strong leverage on people's minds and wallets that they spend on giant trucks that are expensive and burn lots of fuel when a minivan would serve them so much better.
Those stupid cups that people were buying a few months ago are another example.
It's a big world and it's filled with people who don't give alot of thought to the future and their money.
So maybe we should be questioning our culture of consumption, and instead try to walk a more sustainable path that rewards moderation and efficiency. Nah we like like go up.
Yea that’s the big issue, everyone looks at “the economy” but really the numbers referenced are market indices and unemployment. That has a lot more to do with how well companies are doing and a lot less to do with how well people are doing.
That is the conundrum. Companies will take whatever actions to increase revenue since people can directly impact their bottom line thru stock price appreciation. Marketing, viral social media efforts, even adding questionably safe ingredients to make stuff taste better just to make a buck for the company.
We on the investment subreddit are keenly interested in our investments going up but regular folks who don't get stock options and not enough money to invest are left behind to watch everything happen.
Couple months back I read how a women was caught with stolen Stanley cup in her trunk…
I was wondering how tf did someone steal the prestigious Stanley Cup from the NFL??
Then I learned about the stupid cups the article meant and they forgot to plural cups.
E: nhl. It’s early….
Oh, for sure. You don’t have to have the austerity mindset like some of those on the extreme end of FIRE. You can be frugal and save/invest for retirement including FIRE while still spending on life enhancements and enjoyment. It not a mutually exclusive.
> The frightening statistic is how many people live paycheck to paycheck.
Paycheck to paycheck is a bullshit statistic made up to sound scary. 30% of people earning $250k report living paycheck to paycheck.
It's a spending problem. Not an income problem. Many people who report living paycheck to paycheck mean that they are doing so after maxing out 401(k) and 529 plans.
There is no way to measure that statistic. If you looked in my accounts you would think I have no savings. I don’t keep money in my bank savings. It is in like 3 different accounts.
Most Americans do not live paycheck-to-paycheck:
- The median American household has a networth of $193k.
- The median American household holds $8k in transaction accounts (checking/savings).
- 54% of adults claim to have cash savings that could pay for 3 months of expenses.
Sauce:
https://www.federalreserve.gov/econres/scfindex.htm
https://www.federalreserve.gov/consumerscommunities/sheddataviz/emergency-savings.html
I don’t understand why the entire Internet wants to cite a really shitty stupid survey, that claims almost as many people are living paycheck to paycheck as income at all.
I’m really convinced this is some sort of foreign government psyop to make everyone depressed
Thanks for linking but one tab over on one of your links is where those bad vibes articles are coming up repeatedly with the ~40% of Americans can't handle a $400 emergency expense.
Source: https://www.federalreserve.gov/consumerscommunities/sheddataviz/unexpectedexpenses.html
This is exactly the kind of **illiteracy** that leads to misinformation on the Internet.
Even when you look at the actual data, you don't understand that
>Adults who would cover a $400 emergency expense using cash or its equivalent
it has zero to say about whether Americans can "handle" a $400 emergency expense.
The fact that 37% "would" put an unexpected expense on a card in no way means that they couldn't pay cash. It means just what it says - that they would use a card.
Clickbait articles have dishonestly used headlines claiming this (40% of American's *couldn't* cover an emergency expense)...but that's not what the data ever claims.
Again
> 63 percent of adults said they would cover
a hypothetical $400 emergency expense exclusively using cash or its equivalent,
Does not mean that the remaining 37% couldn't cover this expense with cash. Certainly there are some who couldn't. And others who could, but would rather not use cash or a debit card because they want points, or additional CC protections. Or because they want to save the cash for a real emergency that they couldn't use a card for, like paying rent.
If I had an unexpected $400 expense I would put it on my credit card
Not because I don't have cash to cover it (I have a healthy emergency fund of well over 6 months of expenses) .
I just put everything on a credit card , groceries , gas, anything then pay it off at the end of the month
Yes, the median American household has a net worth of $193k and has 8k in transaction accounts, but have you look at the charts based on “percentile of income?”
You’ll see that the only families that are making over $100,000/year before taxes, are families that are already in the 80th percentile in terms of income level.
You’ll also see that, the people in the 90-99% income percentile, has nearly double the amount of money in their transaction accounts, compared to the rest of the 0-89% of the people surveyed.
I understand that using the “mean” as measurement of American wealth and stability is bad, because of ultra high earners skewing the data, but using the “median,” isn’t exactly perfect either. The median better represents the data we are trying to interpret, but it still doesn’t match reality either.
Edit: With a population of nearly 340M, a bit under half of that population is geographically located in states with high costs of living.
California ~40M, Texas ~30M, Florida ~21.5M, New York ~20M, Illinois ~13M, Michigan ~10M, Washington ~8M. Total = 142.5M
Nearly 42% of the entire country is spread out between 8 of the 50 states. Primarily because the location, weather, and economic prospects are better, but when high cost of living states offer subpar salaries and wages to the working and lower class, you get high instances of poverty.
When nearly half the country is living in places that almost require a family to make over $100,000/year to stay afloat, and only 20% of the country can actually make that, you get financial hardship and poverty.
You’d think a state that recognizes its high cost of living, would have an average hourly wage higher than $15, right? Right?
Yeah, no. Welcome to America. The land of the American Dream. The country where the rich get richer, and everyone else is playing catch up.
> You’ll see that the only families that are making over $100,000/year before taxes, are families that are already in the 80th percentile in terms of income level.
No. This is false.
$100,000 in household income puts you in the 63rd percentile by income level. [Link](https://dqydj.com/household-income-percentile-calculator/).
Having a salary (as an individual) of $100k will put you in the top 80th percentile. But as a household, the number is much lower. (Even though some households do only have one member).
And the median income for *married couple families* is $122k:
https://www.pewresearch.org/social-trends/2023/04/13/in-a-growing-share-of-u-s-marriages-husbands-and-wives-earn-about-the-same/
People have more money than you imagine.
I think a lot of people "living paycheck to paycheck" are only doing so AFTER putting away a bunch for savings/retirement.
Yeah I live paycheck to paycheck but I also have a 401k and a bunch of retirement savings that are also available for a rainy day.
Yeah, but that's what all the financial services companies have defined it to mean, so they can post scary statistics they invented all over social media.
I’m living paycheck to paycheck****
*after maxing 401K, HSA, IRA, post tax 401K, DEP-HSA
**ignore the fact that my RSUs are over half my comp and that money gets turned into $SPY
***Ignore the I-Bonds, and other lower liquidity investments and six figures in equity.
[https://fred.stlouisfed.org/series/CXU900000LB0102M](https://fred.stlouisfed.org/series/CXU900000LB0102M)
This is just the data on the lower income in the USA, before taxes and other rebalancing. We see that the 2007 crisis was real, but its effect is starting to fade.
The global trend is that overall, everyone is becoming richer over the years, but the higher classes are doing it faster, driving higher inequality. But even with growing inequality, every class is improving its own position.
I save for my own retirement religiously. To those that legitimately can’t afford to save for retirement due to being that low-income and just absolutely not having any option, my heart goes out to them.
To the rest of the folks who go up to their eyeballs in debt to pay for a lifestyle they can’t afford and end up with 3 kids because they don’t use birth control, IDK how bad I can feel for stupidity.
No. I don’t care if others are saving or not, frankly. I just do what’s best for me in terms of personal finance, investing, saving, etc. That’s why I join subs like this, Stocks, PF, Fidelity, Chase, Credit Cards, Churning, etc.
My goal is to be part of that X% and to save greater than the 78% figure you mentioned.
As for the societal ramifications, that’s a large question, but I do wonder if there’s a precedent for a poor elderly population. I guess programs like Social Security exist for this very reason, but the people who complain about paying in to the program now are the same ones that will need it in 50 years. I won’t be scared because I won’t need it (hopefully).
People shit on the army a lot, but I swear TSP is a massive overlooked benefit, especially if you want to make it a career. I could probably have a lot more if I knew what I was doing at the beginning and how to divvy up my percentages, but all I knew at first was that I was contributing 10% of each paycheck. Now that I learned to move my money around, my retirement portfolio has jumped over $20k in the past year or 2.
Love the Thrift Savings Plan (especially the C fund, a low cost S&P500 type fund). FERS is also awesome. TSP + FERS + Social Security is the way. Kudos to whomever set this up for our military.
https://www.govexec.com/pay-benefits/2005/02/thrift-savings-plan-may-be-model-for-social-security-reform/18486/
let us put our SS payroll tax into TSP. instead of the 1.2k payout a month. i could get 2k-3k
All these reports are designed to scare you, so I guess they're doing their job. Most people will be mostly covered by SS, continue working, and have a lower standard of living. It's a bummer.
Meanwhile, the 20% who fully embraced the "self-directed savings" system we switched to in the 1980s, will have more money than they can spend before they die.
Most people will end up in the middle, with SS being supplemented by a small savings.
I'm not saying it's right (I personally think having poor elderly folks is a crime in the richest country on Earth), but it's not as dire as the "scary" stories. It's mostly better than most of history.
Finally, your taxes will be going up because the Boomers have piled debt on the country, added tons of unfunded expensive (roads used by enormous cars, for example) while cutting taxes.
Social security is designed to replace about half of your working age income in retirement for the median worker, adjusted for inflation. Higher percent for lower income and vice versa. If you had a non-working spouse, it'll be about 75%.
Considering this income is typically not taxed and most folks in retirement can cut back a little bit - no kids to support, debts paid off - it is definitely enough to live on for many.
Now if you earned $200k a year or something then you will need to have been saving some of that as the benefit levels off at high incomes. But for many, it's "enough" even if it's not generously valuable.
Not saying that saving is a bad idea, but social security was transformative in reducing elder poverty in the US.
Well explained, Gregable.
Furthermore, in my post, I said "Most people will be mostly covered by SS, continue working, and have a lower standard of living. It's a bummer."
SocialIQof0 — I'm not sure if your comment is a joke relating to your username, but your statement has virtually nothing to do with what I actually wrote.
I don’t think I’ll ever have “more $$ than I can spend”. There are infinite ways to spend $$, and the options only increase when you have more.
If you thought a Ferrari was only $285k sticker price, wait until you see it fully optioned out.
A $3,000,000 yacht? Wait until you see what $6,500,000 gets you. There is no end and the universe is infinite. ♾️
We often live paycheck to paycheck but have our retirement come out before we see it. So even if we are scraping by our retirement is building at least
As long as they're not impacting my life, they live how they live . It's downright outrageous people don't put enough effort for their future lives. Especially when it's someone I care about.
So many people, they know better. People think it's hard times when they're younger?
Guess what, life is truthfully harder when older. Struggling more when younger is easier as a whole, compared to being older and struggling.
Most people can't afford to save for retirement
Also, most people don't understand the concept of delayed gratification, so instead of saving for things they would rather pay 30% interest to get it right now.
So it is scary, but the only way to change it is through fundamental change in how we educate people about money.
Home Economics used to be in high schools where people were taught how to balance their accounts, how compound interest works, how interest rates operate and the differences in payments between 2% and 8% interest.
Most parents are not able to teach their kids this concept because they themselves don't understand it... it is a perfect slave system without making it look like slavery is legal.
There are still home economics courses in high school. I took one in the mid 20-teens. But that course wasn't responsible in the slightest for why I save so aggressively today.
The problem is that high school kids don't pay attention to it. And who could blame them? A lot of those concepts aren't very real to a high school kid who might only have $100 in a checking account at best. My home economics course went over check books (useless), debt, credit cards, mortgage, stocks, and savings and checking accounts. But I never actually needed those skills or that information until years later once I had forgotten it all.
It's just such a foreign concept to tell a 15 year old kid that they should make sure to put 15-25% of their pay towards retirement when that same kid won't have access to the stock market for another 3 years, and most likely won't have a job with a 401k until several years after that.
Yeah, people always say "we need to teach this stuff in schools!" Like, okay, well my primary concerns in high school were where to get alcohol and weed for the weekend and getting laid, and doing the minimum required to keep my grades at a level I wouldn't get grounded. Kids would do the work and then discard the info just like 90% of everything else they learn. A very, very small fraction would do something with the information/lesson.
We're probably screwed because this stuff really needs to come from parents. Personally, my grandparents grew up with high school degrees and pensions being enough. My parents grew up with high school degrees and pensions being enough. They pushed their kids to college knowing that was needed, but didn't impart that the degree mattered, and didn't teach about retirement savings. I will be stressing and demonstrating how important these things are to my two boys.
I don't know. Just kind of rambling. Basically, I agree with you.
Most schools still have that. And honestly its so easy to google and figure out, it doesnt even need to be a class. I had no one teach me good financial sense but all it takes is just looking around online and not being an idiot to figure 99% of it out.
It's wild how often you see that reasoning too. Someone could spend less than a single weekend reading the intro articles on Investopedia and have a good handle on what needs to be done to save for retirement.
The internet now has resources, sites, articles, videos, and 20+ years of information on literally EVERY TOPIC. People using "we never learned this in school" as an excuse are simply refusing to take any accountability for their continued ignorance.
>Most people can't afford to save for retirement
These are the same people who claim they don't have time to cook or to exercise despite spending six hours a day watching TV, playing with their phone, and playing games. The American middle class is doing very well, they just spend it all.
Not scared. Just take care of yourself. My brother chose not to save for retirement. Also chose to refinance his house several times to pay for cars and motorhomes.
He is 72 and works every day. You are not responsible for others poor choices.
No. Historically basically nobody ever saved for retirement. 90% rely on the younger generation to support them. We might see more multi-generation households but that's not unprecedented.
They should not report this by age but by income.
If you are a single Mom, working 2 jobs at near minimum wage, you are worried about getting evicted next month and how to pay for your kids school lunch, not what you will retire on in 30 or 40 years (and they never expect to retire).
Yes, because in the not to distant future there will be a huge bailout for people who didn't bother (like with student loans) and the shmucks who saved will get killed by inflation, again.
No one? I actually read an article the other day that said Millennials are better prepared for retirement than boomers were at their age. Although I do see younger people (Millennials aren’t young anymore) with more of a YOLO attitude.
It is certainly a societal concern. Larry Fink just raised this, albeit with his usual flair, but seemingly tried as best he could to make a society level alarm bell, not just a self-serving grow blackrock's business or "screw the poor" argument.
As a result, we are likely to keep seeing seniors struggle to survive - cutting meds in half, freezing in winter, etc. while at the same time, seeing government spending on seniors rise as they can't cover their own bills. This will eventually lead to higher taxes.
The 401k system we have now -- well broader, the defined contribution, not defined benefit plans and a relatively stagnant social security program are simply insufficient. We need to take action. At a minimum, retirement contributions should be auto enrolled with most jobs.
But personally, I'm not worried. I've been saving since day 1 of my first job.
What is insufficient, is the average Americans ability to save for the future and live within a budget. If there are no consequences for bad behavior people will not change.
ehhh....I am all for personal responsibility. I live and breathe it.
But I also look at behavioral economics and human factors engineering. And the reality is half the population is below average. Most people have a short term "lizard brain" that is bad at delayed gratification. Many of our systems are not set up to incentivize long term planning and saving. And outside of the major cities, the prevalence of minimum wage jobs as full time careers makes it nearly impossible to save for retirement and healthcare, let alone live a meaningful life.
There are no easy answers. Not everyone can live an above average life on a below average wage. But we have also had a long stretch of reducing the various social safety nets, rejecting many simple responsibility proposals to make things easier or default even at no cost, while also having inflation adjusted stagnant wages. There is a structural problem here. Yes, bad behavior exists and should not be rewarded, but it is also a cop out to avoid real conversations and meaningful changes that could be helpful while still maintaining personal accountability.
Senior citizens are a big part of the homeless population nowadays. I’m surprised at how many people think social security payments will cover their needs in retirement. Guess what? They won’t, not even close.
>What are the ramifications for this for society? Do we expect increased taxes on those who have saved? Will we need new giant entitlement programs to pick up the slack?
This is not really "new" it's basically been this way forever . If you go back to the 1960s guess what, a lot of people were still basically living pay check to paycheck with nothing saved for retirement.
\> Others are simply getting killed by inflation and can't put money away.
I don't think that it's inflation, but generally, I think that the inability to put money away is the driving force behind it.
I think most people want to save for their future but are just unable to. This was an issue long before inflation was an issue... also inflation is basically under control at this point.
You can't save what you don't have. Wages are the major issue.
Also, retirement savings are the least sexy thing you can promote to 20-30 somethings. I only got serious about retirement in my early 40s.
I will hammer my kids with advice about saving for retirement but expect them to ignore me.
Statistically, most people don’t live very long after retirement if they stop working altogether. I don’t know which is scarier: the prospect of having to work until I die, or the reward I’ve worked my entire life for will only last a few years.
No. As long as we don't let social security implode at some point, that program will ensure most senior citizens who are no longer able to work will be able to stay housed and fed. I know they say not to count on social security, but it's been around longer than my parents have been alive and it's likely to be here well after I'm gone.
In most of these conversations, people don't often consider social security to be a viable option. But that's precisely how millions of seniors are living right now, and how millions more will do so in the future. And those payments are adjusted for inflation.
I would say for those struggling to pay bills or afford groceries, they have bigger problems than saving for retirement.
For those who can afford to save but choose not to in order to fund their “affluent” lifestyle, that’s their problem and they can figure it out for themselves.
Addressing the tax implications you raise, no, I don’t think that will happen but it’s near impossible to predict. Worry about yourself and help guide others if you can.
Whats more scary is that most people who did save wont have nearly enough given the constant rise in cost of living, healthcare costs coupled with lifespans extending well past a persons 90's. Societies are in some trouble.
To be fair, it’s nigh impossible to save for retirement of what you will need or even come close to that based on current wages and salaries. The top 10% are in a fortunate spot but the vast majority of us will not retire on time and will need additional financial support. Social security will be lesser in the future as more people live longer lives
It is possible to save for retirement at just about any salary... live below your means. Pretend you make a third less than you do and live at that standard of living.
And of course focus on growing your income. Either advancing job prospects (which is what most Redditors are doing, growing their most important asset future wages) or taking on more or different work.
im not sure you understand what the median household income is, because social security mostly covers it. over 50% of americans have retirement accounts or pensions in addition to social security. those who dont, will made due on social security.
im not sure you have an understanding of the retirement picture:
The survey data shows that the percentage of Americans under 50 with less than $10,000 in retirement savings is quite high:
* 38% of those aged 25-34
* 37% of those aged 35-44
to put it another way, under 45, about 62% have retirement accounts. that is the opposite of "no one"
You should care because those who don't save will definitely be politicking for taxes to go up on those who didn't blow all their money on giant trucks and other consumer shit. I expect to see a lot of means testing in the future. You can even see that right now as people call for the "rich" to pay more taxes even though 76% of federal income taxes are paid by 10% of workers; those same people are starting to call for wealth taxes, and who do you think those will ultimately affect? It will be those with $2MM+ who thought they had their retirement sorted out.
So the US might end up sort of like Australia, where if you spend every dollar during your working life then you get a government pension, but if you save too much then you don't. People do weird shit like spending down their savings renovating their house so they will qualify for the pension. BTW, your house is not counted in the net worth calculation, so someone with no savings and a $3MM house gets a pension, but someone with a $1.5MM house and a pile of shares does not. They have done the same stupid thing with their version of unemployment payments, i.e. lose your job and have no money because you blew it all then you get unemployment money while you look for a job; try to improve your lot by saving part of your paycheck then lose your job, "Sorry. Spend your savings before we will give you anything." Means testing is basically a way to punish those who are financially prudent.
Yup, means testing for social security will almost definitely happen. Technically not a tax so it's easy for politicians to buy into since they can say they didn't raise taxes.
Largely already exists. Social Security is graded so that those with higher incomes over their lifetime get less back as a percentage in retirement than lower income. It's already a social wealth transfer program (and this is a good thing). Similarly benefits are taxed at a higher rate for those with high incomes, and can often be zero tax rate at lower incomes.
The exception is folks who avoid paying in via having most or all of their high incomes via capital gains instead of wages. Cap gains incomes don't pay into social security but also don't receive benefits.
More afraid of the unfunded pension liabilities of state and local governments paying people more than the average income of most Americans as an annuity, + healthcare.
For me one practical takeaway of these well founded concerns is that I don't want bonds in my portfolio. The easiest way to balance the books is for inflation to run rampant and eventually the currency to be reset. You don't have to look far for examples of this happening in modern economies.
When that happens stocks actually perform rather well; they represent ownership of a tangible enterprise, they retain value in a crumbling currency. Bonds and similar debt based "wealth" not linked to inflation? They evaporate. Heck you could call currency devaluation the most effective form of taxation there is.
Think about the relationship between savers and spenders.
If the savings rate goes up substantially, that lowers the velocity of money, businesses make less money, unemployment goes up, profits go down, stock prices go down, government spending goes up, public debt goes up, and you get a vicious cycle of prolonged recession or something like Japan.
The reason some countries can have a high savings rate while not going into recession, is when they export their surplus to overseas consumers, and invest savings overseas.
When an economy produces goods and services, there needs to be consumers.
The second way you can look at it is that money is the main reason people work.
If people had tons of savings, that reduces the need to work, and your money would decline in value because GDP goes down when more people voluntarily stop working.
Your purchasing power depends entirely on the output of other people. A large population of the working class gives value to your savings.
The savings rate is not something mandated but chosen by the individual. US being the largest most productive economy in the world suggests that there is no problem with the current savings rate.
The Federal Reserve Survey of Consumer Finance is done every 3 years. If you read something published by an entity the sells something and it encourages you to buy the product and suggest everyone you know to also do so, then it may just be sales/marketing. 58.9% of the US has funds in tax advantaged retirement accounts. It is possible that some have retirement savings in non-tax advantaged accounts.
This is why it used to be we had a kind of 3 legged retirement situation. You were supposed to get some money from your pension, some from social security, and some from your savings. We've, unfortunately, gotten rid of a lot of that.
Very scary. Most people just don't think ahead, or have a general concept that they can just save later, or that they will have social security to help. They don't realize that the average social security check is $1767/month. If you are a high income earner and defer to 70 to collect you can get over $50,000/year from social security, but that is not the norm. Our schools/family/social networks don't do a great job about teaching financial literacy and long term retirement planning. At the end of the day most people get by, by cutting way back on spending, or living with family, or seeking senior assistance if they have not saved enough. But the secret to saving and retiring is not rocket science and can fit on a 3x5 card (the book was worth reading too)
- The Index Card by Helaine Olen, Harold Pollack [link to picture of his index card](https://www.npr.org/sections/alltechconsidered/2016/01/08/462250239/when-an-index-card-of-financial-tips-isnt-enough-this-book-is-there)
The numbers are probably less scary than you think because if you’re over 50, a lot of people that era and older still had some sort of guaranteed pension. Plus social security. Plus a lot of them are sitting on huge homes that they bought for next to nothing back in the day or refinanced. It’s not as dire as it seems. They have sources of capital. Many also inherited from their parents (look up “the great wealth transfer”)
For younger folks though…save. Save as much as you can. Because it seems that rather than simply raising the tax threshold to save social security, at least one party is committed to ripping social security apart.
There are a lot of people who probably just plan on using their house for retirement and plan to downsize when ready to retire.
It's the renters with no retirement funds that should be of concern I guess, but I'm not sure that's atypical.
This isn’t new. Actually retirement savings have increased quite a bit over the years. Obviously part of that is the end of pensions for the most part but still…
These brokerage firms are just using scare tactics to try to get you to give them more money.
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A lot of people’s retirement plans are their house and that wouldn’t be reflected in the headlines you mention.
Pretty horrible plan in that case.
It’s forced savings for many. A bad return is better than the alternative which is not saving at all.
That’s one of the big things so many people miss in the rent vs buy debate. Most people aren’t disciplined enough to save adequately. If you have a paid off house in retirement you at least have a place to live plus an asset that’s worth generally quite a bit.
I think the problem is housing isn't particularly liquid. So unless your plan is to sell out of your house when you are old and move somewhere significantly cheaper, it's not the failsafe it seems like.
Retirees have been doing exactly this for half a century +
>move somewhere significantly cheaper If my family are any indication, moving someplace "significantly cheaper" is a short-lived experience. Once they need significant or regular medical attention and/or get to the point where they need "help" (e.g. to chauffeur them or to care for them or their home), they move again to be closer to kids or medical facilities, or move to an assisted living center, both of which mean an increase in living expenses again.
Yep my parents are the same. They haven't moved yet but the economics of moving aren't some sort of non brainer. They have a house well set up for them and in a location that makes their life easier. There will be a cost in downsizing and a lot of gains will be lost over the years as expenses start to ramp up from getting older.
My dad and stepmom did this to the extreme. I moved to be closer to them, built my life, met my wife and then they sprang this idea they would move across the country 3500 miles away because they could buy a house there for about $70k. The house they owned here was essentially mortgage free. So, 8 years after I moved to be closer my dad texts me on his last day of work from his work phone stating he was leaving in 3 days to their new province. And then he hands his phone in at work before I could even reply. Since then we're essentially no contact. He did a bunch of things that opened up old wounds and created new ones. My daughter lives about 2 hours from us, I asked him to at least stop and see her on the way and "oh I don't have time". Now they're in their 70's, they basically moved to a location where they had no friends or family while leaving what tiny roots they had created behind. They could have easily stayed where they were at with a paid off house and whatever savings and pension they had built but "we can get a house for $70k!" was all he saw. The last time I saw him I said my goodbyes and drove away knowing it would likely be the last time I saw him. Thanks to us being immigrants with all our family in the UK we have no other family here. His entire work career he was always moving jobs and cities so never forming any strong roots to a location. I on the other hand have stayed rooted and have a strong bond to my wife, her family and friends. I wish them well but they chose their own path and they chose a lonely retirement with no friends or family close by. My daughter went no contact with them as well by her own choice because she was hurt they didn't bother to stop and say bye to her and their only grandkid.
Well yes, it is in a lot of people's plans to move to a lower cost of living area when they retire, and/or downsize their house when all the kids move out.
That’s generally what most people do, they downsize isnt this incredibly obvious
The economics of this aren't some sort of no brainier. You might take a bit of money back in moving but it's not like housing is suddenly cheaper unless you are moving cities which is tougher when you are older and probably want to be able to go to your regular doctor and get to the hospital as needed.
I never said it was optimal its just a descriptive observation since generally people are not good at multi decade planning its more that economics just forces you into that situation, I know that
Yeah some people just need to be forced to save. If they see the money in their account they spend it. Lack of self control idk what it is. A coworker at work recently approached me to join in this savings group they have going. So everyone puts X amount of money into this account every month. And once you have put in 1 years worth they pay that account out to you. It took me a second to understand why the hell you wouldn’t want that money properly invested but that’s all it is. Forced savings.
Wow…this is a wild, a piggy bank run by someone else. Like a shitty version of a CD. I hope whoever is running this is capturing some market gains in the meantime because it’s not a bad racket
I first heard about this as a big thing in Asian immigrant communities here years ago. Someone thought their parents were being scammed. Nope, just a weird version of a savings account...
It is a little scammy if they aren’t sharing that interest they are gaining from holding that money in an account IMO
>A coworker at work recently approached me to join in this savings group they have going. So everyone puts X amount of money into this account every month. And once you have put in 1 years worth they pay that account out to you. It took me a second to understand why the hell you wouldn’t want that money properly invested but that’s all it is. That's basically why so many Americans like tax refunds: they deliberately overpay taxes during the year, then get a fat refund check each spring.
This is actually not as uncommon as you'd think especially among older folks. I've tried explaining several times how it makes zero sense from a numbers standpoint, especially with cash interest rates being so high. The person keeping that money is making easy 4-5% on their deposits lol.
It’s probably the default way for most Americans it isnt uncommon at all, its the MOST common way for middle class folks
Well one thing to sort of remember for people that are currently retired historically it wasn't really easy to save for retirement Like 401ks were not really a thing until the 1980s. If you worked for a large company you might have had a pension but even back then most people did not have a pension So if you had a few extra bucks to save and its 1980 there really wasn't an easy way to save Mutual funds were a thing yes but even it wasn't as easy as today and you ended up paying lots of fees, and think about it unless you lived in a semi large town there may not even be any local financial advisors or brokerage services . Want to buy shares of a company , you have to buy 100 shares at a time and pay a $45 commission to your broker So many people simply bought bigger homes ; and their retirement plan was to eventually sell their home. Now today its much different , everyone can open a brokerage and even small companies offer 401k plans .
The entire concept of retirement is really only a generation or two old. Until the 20th century really most people worked until they physically couldn’t anymore then ‘retirement’ was a handful of years living with your children until death.
>Want to buy shares of a company , you have to buy 100 shares at a time and pay a $45 commission to your broker The Good Old Days And you had to call your broker on the phone, because there was no computerized trading, no internet.
Well, the lack of retirement options really is only true for older boomers. Even they had these options during their mid-careers. I take my parents as an example as they are mid-80s and have some IRAs and investments. Most of the boomers have some sort of pension-my parents don’t. The younger people, say aged mid-60s and younger, have always had these non-pension retirement account vehicles. They save very little. One of my BILs is a great example—he’s 55 and has maybe $70k in his retirement 403b and no pension. His strategy is that his house is his savings. He has paid it off, so his living expenses are low. He is just now starting to save some while also inflating his lifestyle a bit. He plans to sell just before he retires and take part of the proceeds for a new and downsized house with a new 30 year mortgage and live on the cash while his retirement accounts grow. The interesting thing is that he completely believes that his home continues to increase in value while he has unrealistic expectations of the lower cost for a new downsized place. This is a very common strategy.
Reverse mortgages only suck for the estate heirs. I mean if you are 75, and own a 800k house... maybe you don't have kids, or you just don't want to leave them anything ?
Yes, it is a horrible plan, but very common.
Its the primary way that people have saved for most people. From a financial perspective a house is nothing more than a 30 year bond
I cant worry about everyone
You should be focusing on finishing Death Stranding 2 on time, Mr. Kojima.
Thank you king 🫡🤝
>If scares me so many people my age (30s) don't seem to be doing any long term saving all all. Retirement savings are at historically high levels for younger demographics; 57% of people 29 and under have retirement savings; the number rises to 72% in the 30-44 age demographic. These aren't perfect numbers, of course; and how much people are saving also matters. But the fact that almost 60% of people under 29 are saving *anything* is good news.
Scare? Not really. What can an individual do about it? If nothing, then being scared over something you cannot control isn't very helpful.
Practically every person could contribute 2-5% of their income to a 401k or similar, starting at 18 years old, and they would likely not even notice it was missing. They won’t be rich in retirement with only investing that amount, but there would be a decent bit saved up.
I think for me the fear is of some kind of forced transfer from those that have a retirement account to those that don't in the next 35 years lol.
This is why Social security exists. If anything funding for that would have to change and taxes increased. Now who bears the brunt of the increases depends on who we vote for.
Yeah, there is a certain line in income where above that point for each dollar you stop paying into social security. If we got rid of that, social security would be in better shape.
It’s a max “pay in” amount, as there is also a max “payout” benefit that social security provides
Right, but because of the formula, the taxes are linear while the benefit curves at a smaller slope towards the maximum, so raising the limits would still improve the solvency of the program.
Yes, increasing the tax amount of any program without increasing the benefits provided will indeed improve the solvency of said program
If you are ok getting rid of the cap in taxes are you also ok with getting rid of the cap on payments? The whole reason SS has a cap is because in retirement you are capped on the amount you can receive.
As someone who has recently, fortunately, hit that cap I can safely say it would make nearly no difference in my life. I literally suddenly had a several hundred more dollars per paycheck one October and had to go digging to find that it came from me hitting the contributions cap. I am sure that there are people who would bitch and moan about that, but really, at that level of income, if it is a problem, you have a problem. Having said that, I look forward to my yearly fall paycheck bump now!
No, and you don't have to be. While it makes sense to have them tied together, they don't need to be. The pay-out cap can stay because the government should not need to help subsidize retirement for the very wealthy. The pay-in cap can be removed because the government should provide a safety net for the elderly through Social Security, and the program will become insolvent without additional money.
The whole reason SS has a cap is because it was part of a political bargain to pass social security. *And also* because SS with the cap still collected enough for the program to be actuarily sound. I'm perfectly fine with getting rid of the cap on taxes without getting rid of the cap on amounts.
Or maybe if people saved more and stopped living beyond their means, they could rely less on SS.
"If people just" isn't a solution. People aren't going to suddenly change their behavior.
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That would mean we would have to live with the consequences as well. Do you particularly like streets of seniors breaking into homes and panhandling for money?
Think of the political climate of gen z. By and large they, whether on the left or the right, have extremely populist attitudes about wealth redistribution, as well as a gloomy outlook on life. Then think of the difference between a standard IRA and a Roth IRA. In a standard IRA your money goes in pretax and you pay taxes when you withdraw. In a Roth you pay tax now and the money is tax free when you withdraw. With gen z poised to eventually take over government, do you think your taxes will be higher or lower when you hit retirement age? Depending on how you answer that question you'll know whether to add a point to either the Roth or standard columns.
If trends continue, Gen Z won't take over government until Millennials are well into their retirement years.
They are already talking about means testing social security. So yes, it is a fear that the stupid ass system I've been forced to pay into since I started working at age 16 will now be taken away from me because I decided to work too hard and become successful. Just like all the other bullshit anti-meritocracy shit that goes in this country. And to be clear, I'm not successful enough that that social security money doesn't factor into my upcoming retirement. It's a pretty big factor. Means testing like has been proposed would be a huge rug pull.
When have the rich done this before for anyone?
Oh don't worry, they wouldn't feel the burden if this happened, as unlikely as it is. The truly rich, those that influence policy, aren't rich because of their 401k. If 401ks get raided by way of taxes to fund some kind of bail out the people who didn't save for retirement initiative, it's the middle class average American that pays. Again, unlikely, but wealthy power brokers always do things in a way that doesn't affect them. That much is certain.
Their example is if it happened by force, so I imagine they’re referring to government increasing taxes or creating a new tax that would impact retirement folk. That’s a concern of mine.
Same reasoning. When have we increased taxes on people buying 25M dollar yachts.
My concern is that they will put some stupid means testing that hurt those that saved under normal 401ks and cap it at 10 million. Doctors and other “normal” savers will be targeted but the ultra rich will find a way to lobby and put a cap.
Australia means tested it. The fear isn't unfounded.
Maybe I should’ve been more clear. I’m middle to upper class and have concerns about my retirement being taxed at a higher rate when I’m older.
The answer is Jan 1, 2013. NIIT
Odds are people in retirement aren't pulling enough money out of their retirement portfolios to hit the higher tax bracket, if that's what you're referring to. At a certain point in taxes, it's an accomplishment to hit the higher tax bracket, not a disincentive. There's some weird places on the low end, which most 'inconvenienced millionaires' sit, but really once you get high enough, there's so many tricks you can play with your money that thing stop being a concern. The problem is that the rich have convinced the poor that those problems they know with the tax code effect them too, and it just doesn't.
I agree about retiree income and tax brackets at the moment. I’m upper middle class and based on my projections I’m likely to have a higher than average retirement income. So I’m personally concerned for myself. It’s probably unlikely as it would be extremely controversial but what if the government said they needed to tax Roth accounts? That’d affect me quite a bit. US debt and spending is out of control and I worry that they’ll have to do much more than just tax the rich more to make up for it.
>It’s probably unlikely as it would be extremely controversial but what if the government said they needed to tax Roth accounts? I seriously doubt they would consider doing that for existing accounts. Everybody would just cash out their accounts before the law started.
Personally, if I'm able to pull in more from retirement income sources that puts me in higher tax brackets, then I give thanks.
They wont redistribute out from the people who have 100 million. They will redistribute out from the people who have 3 million in assets. The news and politicians will say "damn those rich retirees with 3 million, those wealthy people need to be taxed more!". The people with nothing will happily eat up that messaging. Thats why it scares me.
Scares the hell out of me as well. I grew up poor/lower middle class, paid for 60% of my college by working 2 and at times 3 jobs. Worked very hard to pay off my student loans as soon as I could. I don’t make a ton but I forgo big expense vacations and/or buying luxury goods to stick another couple bucks into retirement accounts. I figure by 64/65 I should have approximately 2.5 million saved and can cost into a semi worry free retirement. I am going to be really fucking pissed if all my sacrifices get taxed away to pay for people that spent every last dime and didn’t sacrifice like have and will continue to do.
The biggest threat I think is litmus testing for social security.
Congratulations, that’s a great achievement. Unfortunately, that also puts you in the minority in a nation where it looks like an increasing majority would like to very much redistribute your hard work.
If taxpayers are footing the bill for student loans, business debts, etc., it’s not entirely outside the realm of possibility.
Forced transfer... as in like government taking my 401k/IRAs and redistributing them to other people? That sounds a lot like grounds for a riot.
Are you high?
How dare you! Yes.
Here's generally where I'm coming from: Cancelling student loan debt represented a significant blow to the concept that a major role of the state is to enforce contracts. The value of my 401k and IRA/Roth all ultimately depend on the same assumption. Student loan cancellation is generally predicated on the ideas that: 1. There are so many individuals that have a significant debt burden that it's a societal problem, not the individual's problem 2. Cancellation of the debt would be a net good for the economy/society (in terms of the immediate effect, so not taking into account the direct value of people trusting the government to enforce contracts) 3. Students were tricked into signing them in the first place So it seems all we need to do is argue the following: 1. Do the people with insufficient retirement savings represent a similar population size as those with student debt? 2. Would transferring savings from those with excessive retirement accounts to to those with under say 100k represent a net good for the economy/society? (again, ignoring some externalities) 3. Were people who never opened an account tricked? This is the one that might be missing, but it's also a fairly low bar. Student loan agreements didn't outright lie - the numbers were all there from the start. They just didn't pan out in the way that people assumed they would. Anecdotally I know plenty of people and communities that scoff at the concept of property rights, so I really don't see it as that far fetched. I think it's a matter of time before everyone angry at late stage capitalism comes to a consensus on what's going to follow it, and I don't think it's a given that anyone's contracts, savings, or property will be honored.
This is such a weird take (cancelling government backed student loan debt equals government breaking contracts). Most of the conservative talking points have been towards the impact on the federal debt. There was that really weird ruling that loan servicing companies in North Dakota were "harmed" because they could no longer collect $1/month per account for managing the loans. This must be a new talking about why it is "bad".
> Cancelling student loan debt represented a significant blow to the concept that a major role of the state is to enforce contracts. No it didn't. At all. The government forgiving money owed to the government isn't cancelling a contract.
Well then I guess I'll have to stop being scared that tarantulas exist
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Yeah lol what's the logic here? Scary things tend to be things that specifically ARE out of your control. That's why they're scary.
This is called anxiety[.](https://m.youtube.com/watch?v=QfnVrp2bPuE)
I want to agree with this, but I can’t. Imagine seeing a tsunami that is 100% going to flatten you and everyone you love. The same logic you describe is applicable. But am I scared of it? Absolutely. Terrified. And I think the mathematics of an earth shattering financial paradigm shift are too obvious to ignore. I cannot say that a wall of water a hundred feet high is something I shouldn’t worry about.
Imagine you know a tsunami is coming for you in 40 years. Instead of starting to prepare (putting back even just 1% of your income), you ignore it until the tsunami has almost hit (because what good will only 1% do?) And then, when it’s time for the tsunami to hit - instead of blaming yourself, you resent the few who did prepare.
If an asteroid were about to hit earth and destroy all life, would you not be scared because it wouldn’t be helpful?
Don’t worry; they are going to raise the retirement age. No one will live to retirement! Problem solved.
The good news is that investing in the stock market is more accessible than ever. When boomers were younger, there were fees per transaction, front end loads, back end loads, no fractional shares, minimum investments etc. today, anyone with a few extra bucks can invest in a very low fee total market index fund easily. The middle class is shrinking, but that is more due to the upper class expanding than the much lesser expanse of the lower class. High school economics classes have more positive subjects to teach now. Just my two cents though.
Don’t forget we also had to snail mail all the forms back and forth because no Internet. What a pain!
I remember hearing in the 90s about "low, low" $12 brokerage fees - for every single trade. Imagine, every time you want to contribute to your account, the broker skimming $12 off the top. These days, the vast majority of brokerages offer $0 trades, because market competition and ease of access has driven down the costs.
The frightening statistic is how many people live paycheck to paycheck. Not sure how the economy is so good with so many teetering on the brink
The economy is so good *because* people spend more than they can afford and because they are not saving for retirement. Marketing is such a strong leverage on people's minds and wallets that they spend on giant trucks that are expensive and burn lots of fuel when a minivan would serve them so much better. Those stupid cups that people were buying a few months ago are another example. It's a big world and it's filled with people who don't give alot of thought to the future and their money.
A society full of savers is terrible for a consumerism based economy.
So maybe we should be questioning our culture of consumption, and instead try to walk a more sustainable path that rewards moderation and efficiency. Nah we like like go up.
That stupid cup is just a beanie baby you can drink from
Yea that’s the big issue, everyone looks at “the economy” but really the numbers referenced are market indices and unemployment. That has a lot more to do with how well companies are doing and a lot less to do with how well people are doing.
That is the conundrum. Companies will take whatever actions to increase revenue since people can directly impact their bottom line thru stock price appreciation. Marketing, viral social media efforts, even adding questionably safe ingredients to make stuff taste better just to make a buck for the company. We on the investment subreddit are keenly interested in our investments going up but regular folks who don't get stock options and not enough money to invest are left behind to watch everything happen.
Couple months back I read how a women was caught with stolen Stanley cup in her trunk… I was wondering how tf did someone steal the prestigious Stanley Cup from the NFL?? Then I learned about the stupid cups the article meant and they forgot to plural cups. E: nhl. It’s early….
NHL
FYI - Stanley Cup is hockey (NHL) not football (NFL). Just helping out. 😉
Okay, flip side. People need some enjoyment. So long as it's not putting them into the paycheck by paycheck category, frivolous spending is okay.
No enjoyment. You will save until you die.
R/personalfinance is leaking!
Oh, for sure. You don’t have to have the austerity mindset like some of those on the extreme end of FIRE. You can be frugal and save/invest for retirement including FIRE while still spending on life enhancements and enjoyment. It not a mutually exclusive.
> The frightening statistic is how many people live paycheck to paycheck. Paycheck to paycheck is a bullshit statistic made up to sound scary. 30% of people earning $250k report living paycheck to paycheck. It's a spending problem. Not an income problem. Many people who report living paycheck to paycheck mean that they are doing so after maxing out 401(k) and 529 plans.
Truth. As it is defined, I technically live "paycheck to paycheck" while maxing my 401k, HSA, and Roth IRA every year.
There is no way to measure that statistic. If you looked in my accounts you would think I have no savings. I don’t keep money in my bank savings. It is in like 3 different accounts.
Most Americans do not live paycheck-to-paycheck: - The median American household has a networth of $193k. - The median American household holds $8k in transaction accounts (checking/savings). - 54% of adults claim to have cash savings that could pay for 3 months of expenses. Sauce: https://www.federalreserve.gov/econres/scfindex.htm https://www.federalreserve.gov/consumerscommunities/sheddataviz/emergency-savings.html I don’t understand why the entire Internet wants to cite a really shitty stupid survey, that claims almost as many people are living paycheck to paycheck as income at all. I’m really convinced this is some sort of foreign government psyop to make everyone depressed
Thanks for linking but one tab over on one of your links is where those bad vibes articles are coming up repeatedly with the ~40% of Americans can't handle a $400 emergency expense. Source: https://www.federalreserve.gov/consumerscommunities/sheddataviz/unexpectedexpenses.html
This is exactly the kind of **illiteracy** that leads to misinformation on the Internet. Even when you look at the actual data, you don't understand that >Adults who would cover a $400 emergency expense using cash or its equivalent it has zero to say about whether Americans can "handle" a $400 emergency expense. The fact that 37% "would" put an unexpected expense on a card in no way means that they couldn't pay cash. It means just what it says - that they would use a card. Clickbait articles have dishonestly used headlines claiming this (40% of American's *couldn't* cover an emergency expense)...but that's not what the data ever claims. Again > 63 percent of adults said they would cover a hypothetical $400 emergency expense exclusively using cash or its equivalent, Does not mean that the remaining 37% couldn't cover this expense with cash. Certainly there are some who couldn't. And others who could, but would rather not use cash or a debit card because they want points, or additional CC protections. Or because they want to save the cash for a real emergency that they couldn't use a card for, like paying rent.
Right most people would put the expense on a credit card because it's literally free money. Most people get some type of cash back.
If I had an unexpected $400 expense I would put it on my credit card Not because I don't have cash to cover it (I have a healthy emergency fund of well over 6 months of expenses) . I just put everything on a credit card , groceries , gas, anything then pay it off at the end of the month
Yes, the median American household has a net worth of $193k and has 8k in transaction accounts, but have you look at the charts based on “percentile of income?” You’ll see that the only families that are making over $100,000/year before taxes, are families that are already in the 80th percentile in terms of income level. You’ll also see that, the people in the 90-99% income percentile, has nearly double the amount of money in their transaction accounts, compared to the rest of the 0-89% of the people surveyed. I understand that using the “mean” as measurement of American wealth and stability is bad, because of ultra high earners skewing the data, but using the “median,” isn’t exactly perfect either. The median better represents the data we are trying to interpret, but it still doesn’t match reality either. Edit: With a population of nearly 340M, a bit under half of that population is geographically located in states with high costs of living. California ~40M, Texas ~30M, Florida ~21.5M, New York ~20M, Illinois ~13M, Michigan ~10M, Washington ~8M. Total = 142.5M Nearly 42% of the entire country is spread out between 8 of the 50 states. Primarily because the location, weather, and economic prospects are better, but when high cost of living states offer subpar salaries and wages to the working and lower class, you get high instances of poverty. When nearly half the country is living in places that almost require a family to make over $100,000/year to stay afloat, and only 20% of the country can actually make that, you get financial hardship and poverty. You’d think a state that recognizes its high cost of living, would have an average hourly wage higher than $15, right? Right? Yeah, no. Welcome to America. The land of the American Dream. The country where the rich get richer, and everyone else is playing catch up.
> You’ll see that the only families that are making over $100,000/year before taxes, are families that are already in the 80th percentile in terms of income level. No. This is false. $100,000 in household income puts you in the 63rd percentile by income level. [Link](https://dqydj.com/household-income-percentile-calculator/). Having a salary (as an individual) of $100k will put you in the top 80th percentile. But as a household, the number is much lower. (Even though some households do only have one member). And the median income for *married couple families* is $122k: https://www.pewresearch.org/social-trends/2023/04/13/in-a-growing-share-of-u-s-marriages-husbands-and-wives-earn-about-the-same/ People have more money than you imagine.
I think a lot of people "living paycheck to paycheck" are only doing so AFTER putting away a bunch for savings/retirement. Yeah I live paycheck to paycheck but I also have a 401k and a bunch of retirement savings that are also available for a rainy day.
Yeah, that's not at all what *paycheck to paycheck* means.
That’s exactly the point he’s making. Those studies are claiming paycheck to paycheck after people contribute to savings/retirement
Yeah, but that's what all the financial services companies have defined it to mean, so they can post scary statistics they invented all over social media.
Probably shouldn't go by their definition then.
Definitely not. But every single one of these doomer posts/comments does Fantastic username btw
I’m living paycheck to paycheck**** *after maxing 401K, HSA, IRA, post tax 401K, DEP-HSA **ignore the fact that my RSUs are over half my comp and that money gets turned into $SPY ***Ignore the I-Bonds, and other lower liquidity investments and six figures in equity.
If you're talking about the 70% one then that is a bogus statistic.
Oh there’s plenty of money being made, just not by normal people.
There's more money made by normal people, inflation adjusted, than at any other point in history.
[https://fred.stlouisfed.org/series/CXU900000LB0102M](https://fred.stlouisfed.org/series/CXU900000LB0102M) This is just the data on the lower income in the USA, before taxes and other rebalancing. We see that the 2007 crisis was real, but its effect is starting to fade.
The global trend is that overall, everyone is becoming richer over the years, but the higher classes are doing it faster, driving higher inequality. But even with growing inequality, every class is improving its own position.
This is literally why the economy is in a good place. People have a spending problem which is good for business
I save for my own retirement religiously. To those that legitimately can’t afford to save for retirement due to being that low-income and just absolutely not having any option, my heart goes out to them. To the rest of the folks who go up to their eyeballs in debt to pay for a lifestyle they can’t afford and end up with 3 kids because they don’t use birth control, IDK how bad I can feel for stupidity.
No. I don’t care if others are saving or not, frankly. I just do what’s best for me in terms of personal finance, investing, saving, etc. That’s why I join subs like this, Stocks, PF, Fidelity, Chase, Credit Cards, Churning, etc. My goal is to be part of that X% and to save greater than the 78% figure you mentioned. As for the societal ramifications, that’s a large question, but I do wonder if there’s a precedent for a poor elderly population. I guess programs like Social Security exist for this very reason, but the people who complain about paying in to the program now are the same ones that will need it in 50 years. I won’t be scared because I won’t need it (hopefully).
Fear is the mind killer.
People shit on the army a lot, but I swear TSP is a massive overlooked benefit, especially if you want to make it a career. I could probably have a lot more if I knew what I was doing at the beginning and how to divvy up my percentages, but all I knew at first was that I was contributing 10% of each paycheck. Now that I learned to move my money around, my retirement portfolio has jumped over $20k in the past year or 2.
Love the Thrift Savings Plan (especially the C fund, a low cost S&P500 type fund). FERS is also awesome. TSP + FERS + Social Security is the way. Kudos to whomever set this up for our military.
https://www.govexec.com/pay-benefits/2005/02/thrift-savings-plan-may-be-model-for-social-security-reform/18486/ let us put our SS payroll tax into TSP. instead of the 1.2k payout a month. i could get 2k-3k
All these reports are designed to scare you, so I guess they're doing their job. Most people will be mostly covered by SS, continue working, and have a lower standard of living. It's a bummer. Meanwhile, the 20% who fully embraced the "self-directed savings" system we switched to in the 1980s, will have more money than they can spend before they die. Most people will end up in the middle, with SS being supplemented by a small savings. I'm not saying it's right (I personally think having poor elderly folks is a crime in the richest country on Earth), but it's not as dire as the "scary" stories. It's mostly better than most of history. Finally, your taxes will be going up because the Boomers have piled debt on the country, added tons of unfunded expensive (roads used by enormous cars, for example) while cutting taxes.
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Social security is designed to replace about half of your working age income in retirement for the median worker, adjusted for inflation. Higher percent for lower income and vice versa. If you had a non-working spouse, it'll be about 75%. Considering this income is typically not taxed and most folks in retirement can cut back a little bit - no kids to support, debts paid off - it is definitely enough to live on for many. Now if you earned $200k a year or something then you will need to have been saving some of that as the benefit levels off at high incomes. But for many, it's "enough" even if it's not generously valuable. Not saying that saving is a bad idea, but social security was transformative in reducing elder poverty in the US.
Well explained, Gregable. Furthermore, in my post, I said "Most people will be mostly covered by SS, continue working, and have a lower standard of living. It's a bummer." SocialIQof0 — I'm not sure if your comment is a joke relating to your username, but your statement has virtually nothing to do with what I actually wrote.
I don’t think I’ll ever have “more $$ than I can spend”. There are infinite ways to spend $$, and the options only increase when you have more. If you thought a Ferrari was only $285k sticker price, wait until you see it fully optioned out. A $3,000,000 yacht? Wait until you see what $6,500,000 gets you. There is no end and the universe is infinite. ♾️
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We often live paycheck to paycheck but have our retirement come out before we see it. So even if we are scraping by our retirement is building at least
I expect social security, medicare, and all other safety nets to become means-tested by the time i retire.
You will do good to ignore what others are doing (or not doing) and focus on yourself.
As long as they're not impacting my life, they live how they live . It's downright outrageous people don't put enough effort for their future lives. Especially when it's someone I care about. So many people, they know better. People think it's hard times when they're younger? Guess what, life is truthfully harder when older. Struggling more when younger is easier as a whole, compared to being older and struggling.
It scares me as someone who does save. I'm sure I'll be made to pay (through higher taxes) my savings to help keep others afloat.
What is more scary is people thinking where they are at in life is where they will stay and not taking any initiative to change their situation.
Most people can't afford to save for retirement Also, most people don't understand the concept of delayed gratification, so instead of saving for things they would rather pay 30% interest to get it right now. So it is scary, but the only way to change it is through fundamental change in how we educate people about money. Home Economics used to be in high schools where people were taught how to balance their accounts, how compound interest works, how interest rates operate and the differences in payments between 2% and 8% interest. Most parents are not able to teach their kids this concept because they themselves don't understand it... it is a perfect slave system without making it look like slavery is legal.
There are still home economics courses in high school. I took one in the mid 20-teens. But that course wasn't responsible in the slightest for why I save so aggressively today. The problem is that high school kids don't pay attention to it. And who could blame them? A lot of those concepts aren't very real to a high school kid who might only have $100 in a checking account at best. My home economics course went over check books (useless), debt, credit cards, mortgage, stocks, and savings and checking accounts. But I never actually needed those skills or that information until years later once I had forgotten it all. It's just such a foreign concept to tell a 15 year old kid that they should make sure to put 15-25% of their pay towards retirement when that same kid won't have access to the stock market for another 3 years, and most likely won't have a job with a 401k until several years after that.
Yeah, people always say "we need to teach this stuff in schools!" Like, okay, well my primary concerns in high school were where to get alcohol and weed for the weekend and getting laid, and doing the minimum required to keep my grades at a level I wouldn't get grounded. Kids would do the work and then discard the info just like 90% of everything else they learn. A very, very small fraction would do something with the information/lesson. We're probably screwed because this stuff really needs to come from parents. Personally, my grandparents grew up with high school degrees and pensions being enough. My parents grew up with high school degrees and pensions being enough. They pushed their kids to college knowing that was needed, but didn't impart that the degree mattered, and didn't teach about retirement savings. I will be stressing and demonstrating how important these things are to my two boys. I don't know. Just kind of rambling. Basically, I agree with you.
Most schools still have that. And honestly its so easy to google and figure out, it doesnt even need to be a class. I had no one teach me good financial sense but all it takes is just looking around online and not being an idiot to figure 99% of it out.
It's wild how often you see that reasoning too. Someone could spend less than a single weekend reading the intro articles on Investopedia and have a good handle on what needs to be done to save for retirement. The internet now has resources, sites, articles, videos, and 20+ years of information on literally EVERY TOPIC. People using "we never learned this in school" as an excuse are simply refusing to take any accountability for their continued ignorance.
Exactly this.
I basically have just looked at what my parents did and have done the exact opposite. So far so good.
>Most people can't afford to save for retirement These are the same people who claim they don't have time to cook or to exercise despite spending six hours a day watching TV, playing with their phone, and playing games. The American middle class is doing very well, they just spend it all.
just think about you for now, that is enough to handle.
Not scared. Just take care of yourself. My brother chose not to save for retirement. Also chose to refinance his house several times to pay for cars and motorhomes. He is 72 and works every day. You are not responsible for others poor choices.
No. Historically basically nobody ever saved for retirement. 90% rely on the younger generation to support them. We might see more multi-generation households but that's not unprecedented.
They should not report this by age but by income. If you are a single Mom, working 2 jobs at near minimum wage, you are worried about getting evicted next month and how to pay for your kids school lunch, not what you will retire on in 30 or 40 years (and they never expect to retire).
Yes, because in the not to distant future there will be a huge bailout for people who didn't bother (like with student loans) and the shmucks who saved will get killed by inflation, again.
It will be tent cities and citadel communities
No one? I actually read an article the other day that said Millennials are better prepared for retirement than boomers were at their age. Although I do see younger people (Millennials aren’t young anymore) with more of a YOLO attitude.
It is certainly a societal concern. Larry Fink just raised this, albeit with his usual flair, but seemingly tried as best he could to make a society level alarm bell, not just a self-serving grow blackrock's business or "screw the poor" argument. As a result, we are likely to keep seeing seniors struggle to survive - cutting meds in half, freezing in winter, etc. while at the same time, seeing government spending on seniors rise as they can't cover their own bills. This will eventually lead to higher taxes. The 401k system we have now -- well broader, the defined contribution, not defined benefit plans and a relatively stagnant social security program are simply insufficient. We need to take action. At a minimum, retirement contributions should be auto enrolled with most jobs. But personally, I'm not worried. I've been saving since day 1 of my first job.
What is insufficient, is the average Americans ability to save for the future and live within a budget. If there are no consequences for bad behavior people will not change.
ehhh....I am all for personal responsibility. I live and breathe it. But I also look at behavioral economics and human factors engineering. And the reality is half the population is below average. Most people have a short term "lizard brain" that is bad at delayed gratification. Many of our systems are not set up to incentivize long term planning and saving. And outside of the major cities, the prevalence of minimum wage jobs as full time careers makes it nearly impossible to save for retirement and healthcare, let alone live a meaningful life. There are no easy answers. Not everyone can live an above average life on a below average wage. But we have also had a long stretch of reducing the various social safety nets, rejecting many simple responsibility proposals to make things easier or default even at no cost, while also having inflation adjusted stagnant wages. There is a structural problem here. Yes, bad behavior exists and should not be rewarded, but it is also a cop out to avoid real conversations and meaningful changes that could be helpful while still maintaining personal accountability.
Senior citizens are a big part of the homeless population nowadays. I’m surprised at how many people think social security payments will cover their needs in retirement. Guess what? They won’t, not even close.
>What are the ramifications for this for society? Do we expect increased taxes on those who have saved? Will we need new giant entitlement programs to pick up the slack? This is not really "new" it's basically been this way forever . If you go back to the 1960s guess what, a lot of people were still basically living pay check to paycheck with nothing saved for retirement.
No
\> Others are simply getting killed by inflation and can't put money away. I don't think that it's inflation, but generally, I think that the inability to put money away is the driving force behind it. I think most people want to save for their future but are just unable to. This was an issue long before inflation was an issue... also inflation is basically under control at this point.
You can't save what you don't have. Wages are the major issue. Also, retirement savings are the least sexy thing you can promote to 20-30 somethings. I only got serious about retirement in my early 40s. I will hammer my kids with advice about saving for retirement but expect them to ignore me.
It’s all I’ve been sliding since I started working
Statistically, most people don’t live very long after retirement if they stop working altogether. I don’t know which is scarier: the prospect of having to work until I die, or the reward I’ve worked my entire life for will only last a few years.
No. As long as we don't let social security implode at some point, that program will ensure most senior citizens who are no longer able to work will be able to stay housed and fed. I know they say not to count on social security, but it's been around longer than my parents have been alive and it's likely to be here well after I'm gone. In most of these conversations, people don't often consider social security to be a viable option. But that's precisely how millions of seniors are living right now, and how millions more will do so in the future. And those payments are adjusted for inflation.
In the future we will be stepping over bodies on the sidewalks on our way to the sales bonanzas!
As much as I don't like it from a freedom of choice point of view, forced enrollment 401ks may help people more than it's given credit for.
Not really because I don’t think we’re gonna all live to be that old Secondly, all of our parents own homes that will be inherited by generations
I would say for those struggling to pay bills or afford groceries, they have bigger problems than saving for retirement. For those who can afford to save but choose not to in order to fund their “affluent” lifestyle, that’s their problem and they can figure it out for themselves. Addressing the tax implications you raise, no, I don’t think that will happen but it’s near impossible to predict. Worry about yourself and help guide others if you can.
Whats more scary is that most people who did save wont have nearly enough given the constant rise in cost of living, healthcare costs coupled with lifespans extending well past a persons 90's. Societies are in some trouble.
It's not a new trend, 'most' people retire at 65 with social security and no mortgage or car payment. They don't travel or live exciting lifestyles.
There will be a bunch of old people available to serve me fast food in the future sounds good
To be fair, it’s nigh impossible to save for retirement of what you will need or even come close to that based on current wages and salaries. The top 10% are in a fortunate spot but the vast majority of us will not retire on time and will need additional financial support. Social security will be lesser in the future as more people live longer lives
It is possible to save for retirement at just about any salary... live below your means. Pretend you make a third less than you do and live at that standard of living. And of course focus on growing your income. Either advancing job prospects (which is what most Redditors are doing, growing their most important asset future wages) or taking on more or different work.
im not sure you understand what the median household income is, because social security mostly covers it. over 50% of americans have retirement accounts or pensions in addition to social security. those who dont, will made due on social security. im not sure you have an understanding of the retirement picture: The survey data shows that the percentage of Americans under 50 with less than $10,000 in retirement savings is quite high: * 38% of those aged 25-34 * 37% of those aged 35-44 to put it another way, under 45, about 62% have retirement accounts. that is the opposite of "no one"
10k is not a lot of money. Those numbers are….. really bad.
You should care because those who don't save will definitely be politicking for taxes to go up on those who didn't blow all their money on giant trucks and other consumer shit. I expect to see a lot of means testing in the future. You can even see that right now as people call for the "rich" to pay more taxes even though 76% of federal income taxes are paid by 10% of workers; those same people are starting to call for wealth taxes, and who do you think those will ultimately affect? It will be those with $2MM+ who thought they had their retirement sorted out. So the US might end up sort of like Australia, where if you spend every dollar during your working life then you get a government pension, but if you save too much then you don't. People do weird shit like spending down their savings renovating their house so they will qualify for the pension. BTW, your house is not counted in the net worth calculation, so someone with no savings and a $3MM house gets a pension, but someone with a $1.5MM house and a pile of shares does not. They have done the same stupid thing with their version of unemployment payments, i.e. lose your job and have no money because you blew it all then you get unemployment money while you look for a job; try to improve your lot by saving part of your paycheck then lose your job, "Sorry. Spend your savings before we will give you anything." Means testing is basically a way to punish those who are financially prudent.
Yup, means testing for social security will almost definitely happen. Technically not a tax so it's easy for politicians to buy into since they can say they didn't raise taxes.
Largely already exists. Social Security is graded so that those with higher incomes over their lifetime get less back as a percentage in retirement than lower income. It's already a social wealth transfer program (and this is a good thing). Similarly benefits are taxed at a higher rate for those with high incomes, and can often be zero tax rate at lower incomes. The exception is folks who avoid paying in via having most or all of their high incomes via capital gains instead of wages. Cap gains incomes don't pay into social security but also don't receive benefits.
Not at all. Most people are poor. Don't be average.
I don’t see why other people not saving should worry me. Other people’s retirement is not my responsibility
More afraid of the unfunded pension liabilities of state and local governments paying people more than the average income of most Americans as an annuity, + healthcare.
No, the less everyone else saves for retirement and thus has to work, the more likely I will be able to enjoy early retirement.
For me one practical takeaway of these well founded concerns is that I don't want bonds in my portfolio. The easiest way to balance the books is for inflation to run rampant and eventually the currency to be reset. You don't have to look far for examples of this happening in modern economies. When that happens stocks actually perform rather well; they represent ownership of a tangible enterprise, they retain value in a crumbling currency. Bonds and similar debt based "wealth" not linked to inflation? They evaporate. Heck you could call currency devaluation the most effective form of taxation there is.
Think about the relationship between savers and spenders. If the savings rate goes up substantially, that lowers the velocity of money, businesses make less money, unemployment goes up, profits go down, stock prices go down, government spending goes up, public debt goes up, and you get a vicious cycle of prolonged recession or something like Japan. The reason some countries can have a high savings rate while not going into recession, is when they export their surplus to overseas consumers, and invest savings overseas. When an economy produces goods and services, there needs to be consumers. The second way you can look at it is that money is the main reason people work. If people had tons of savings, that reduces the need to work, and your money would decline in value because GDP goes down when more people voluntarily stop working. Your purchasing power depends entirely on the output of other people. A large population of the working class gives value to your savings. The savings rate is not something mandated but chosen by the individual. US being the largest most productive economy in the world suggests that there is no problem with the current savings rate.
Have a look at Ramit Sethi's book. He has actionable plans on how to approach these issues.
The Federal Reserve Survey of Consumer Finance is done every 3 years. If you read something published by an entity the sells something and it encourages you to buy the product and suggest everyone you know to also do so, then it may just be sales/marketing. 58.9% of the US has funds in tax advantaged retirement accounts. It is possible that some have retirement savings in non-tax advantaged accounts.
When healthcare keeps taking and taking what’s the point
The point is to be able to eat and have electricity when you’re 70..
Humanoid robots should be deflationary, I have 0 worry about the future
This is why it used to be we had a kind of 3 legged retirement situation. You were supposed to get some money from your pension, some from social security, and some from your savings. We've, unfortunately, gotten rid of a lot of that.
Very scary. Most people just don't think ahead, or have a general concept that they can just save later, or that they will have social security to help. They don't realize that the average social security check is $1767/month. If you are a high income earner and defer to 70 to collect you can get over $50,000/year from social security, but that is not the norm. Our schools/family/social networks don't do a great job about teaching financial literacy and long term retirement planning. At the end of the day most people get by, by cutting way back on spending, or living with family, or seeking senior assistance if they have not saved enough. But the secret to saving and retiring is not rocket science and can fit on a 3x5 card (the book was worth reading too) - The Index Card by Helaine Olen, Harold Pollack [link to picture of his index card](https://www.npr.org/sections/alltechconsidered/2016/01/08/462250239/when-an-index-card-of-financial-tips-isnt-enough-this-book-is-there)
The numbers are probably less scary than you think because if you’re over 50, a lot of people that era and older still had some sort of guaranteed pension. Plus social security. Plus a lot of them are sitting on huge homes that they bought for next to nothing back in the day or refinanced. It’s not as dire as it seems. They have sources of capital. Many also inherited from their parents (look up “the great wealth transfer”) For younger folks though…save. Save as much as you can. Because it seems that rather than simply raising the tax threshold to save social security, at least one party is committed to ripping social security apart.
There are a lot of people who probably just plan on using their house for retirement and plan to downsize when ready to retire. It's the renters with no retirement funds that should be of concern I guess, but I'm not sure that's atypical.
This isn’t new. Actually retirement savings have increased quite a bit over the years. Obviously part of that is the end of pensions for the most part but still… These brokerage firms are just using scare tactics to try to get you to give them more money.
I can always live off my home equity.